Accounting Tech through the Years: A Long Look Back

By
Michael Castelluccio

June 1, 2019

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The long arc of IMA’s history stretches back to the year of the Treaty of Versailles and the end of World War I. The first official publication of NACA, published in December 1919, was created within the offices of the Woolworth Building in New York, which, at the time, was the tallest building in the world. Browsing through early issues of NACA publications, we can trace the evolution of the technologies used by financial professionals in the 1920s through today.

What should have been the “green years” for the association were pretty much paper-white. A strong preference for hand posting in loose-leaf ledgers is evident, not only in the sparsely scattered articles about business machines but also in infrequent ads for them. Only one vendor list for business machines can be found in that first decade.

The December 1927 issue of the NACA Bulletin is dedicated to the “Cost of Cost Accounting,” and the part of the article dealing with office equipment surprisingly opens with this warning: “Too much office equipment is ‘sold’ and not enough is ‘bought.’” The message is clear: Resist the high pressure exerted by salesmen and buy only what you really need. “Better to hire an employee at $1,000 per year than spend $500 on a machine,” the author advises. He adds, “Ordinarily, machine posted records are nice things to have from the standpoint of appearance, but I dare say there are places where hand posting is more economical and just as good from a practical standpoint.”

PUNCH CARD “SUPERFORMS”

Business machines in the 1920s were heavy and expensive, but they did provide one very important advantage—they furnished automatic proof. Or, as explained in a Remington print ad in the publication, “Every practical user of a bookkeeping machine knows that speed is useless without accuracy, and even accuracy is not final without certainty. You need, above all things, an infallible proof that you are right.” Not just certainty, but infallible proof of your work. Now there’s a selling point to chew on as you consider the latest Remington typewriter/bookkeeping combo machine.

In the 1920s, the following accounting machines were specifically advertised in NACA publications:

The Burroughs Adding Machine was an automatic bookkeeping machine that could post combinations of two or more records and furnish a proof-journal on accounts payable, payroll, GL, and other records. And as a bonus, the Burroughs Moon-Hopkins Typewriter Bookkeeping Machine was alphanumeric-capable, combining typing and bookkeeping.

The Remington Typewriter Company also sold a desktop bookkeeping machine along with its typewriters.

Felt & Tarrant Mfg. Co. had an adding and calculating machine called the Controlled-Key Comptometer.

Powers Accounting Machine Company had several accounting machines that sorted and tabulated punch cards.

Other manufacturers that appeared in the October 1921 issue were the Monroe Calculating Machine Company, International Time Recording Company, Addressograph Company, Stromberg Electric Company (clocks), and Underwood Typewriter Company.

So in the 1920 office we might find shelves of ledgers, but also adding machines, typewriters, or maybe a time clock, and somewhere near the center of the room there would most likely be a box of punch cards with both numbers and letters, and a tabulator and sorter waiting to work on them.

The most advanced technology of the day was a system that was invented in the 18th Century by the Jacquard company, which printed fabrics. The punch card created a paper record for information in an electromechanical system that had been updated and tailored for financial operations by the inventor Herman Hollerith in 1888. His firm, the Computing-Tabulating-Recording Company, was bought in 1924 by Thomas Watson, who renamed it International Business Machines (IBM). Punch cards would survive another 40 years, well into the computer age. But back in the 1920s, the three machines that created, sorted, and tabulated alphanumeric information were the keypunch, sorter, and tabulator.

In the November 1, 1927, issue of the NACA Bulletin (“An Adaptation of Mechanical Accounting Control”), author Lawrence G. Regner praises more than just the “automatic proof” offered by the system. “Our accounting expense has been reduced 25%, whereas our volume has increased 200%.” And he lists the cost of his company’s tabulating division as $200 per month for tabulating and key punching for approximately 50,000 cards per month.

At the time and until the 1950s, the system didn’t need a (digital) computer. The card sorter arranged stacks of cards, and each category could then be run by the tabulating machine to apply whatever accounting function one chose to use.

An article (“Punched Card System of Inventory Control”) in the August 15, 1923, issue explains punch cards. The author describes what the card is and does. “A tabulating card is usually considered as nothing but an instrument for making the tabulators and sorters function, but in this system it is first used as an office form, about 3 x 7 inches in size, capable of being used in much the same way as any other card or piece of paper of these approximate dimensions. Although the paper quality of a tabulating card is not high, it takes ink reasonably well and will stand a lot of handling; and second, by the machine application it becomes a superform which, after being punched, can sort itself, print itself and add itself in many columns simultaneously.”

The longevity of the Hollerith card in a technology sector that evolved by thriving on creative destruction was nothing short of miraculous. Programmers were still working in Fortran and Cobol on square-punched IBM cards and round-punched Remington Rand formats in the mid-1970s.

THE MIDDLE YEARS

The midpoint of IMA’s history is nestled right in the middle of the mainframe years, also known as the Era of IBM and the Seven Dwarfs (Burroughs, UNIVAC, NCR, Control Data Corp., Honeywell, General Electric, and RCA). A glance at the cover of the September 1968 Management Accounting magazine reflects the shift from the early electromechanical business tools to computers.

Five of the 10 articles in the issue directly relate to the third generation of computer hardware, time-sharing, designing information systems, financial data banks, and whether you should buy or lease your computer technology. The image on the front page is a line drawing of a mainframe serving 12 departments including accounting, purchasing, payroll, and budgets.

The inside cover is a full-page ad extolling the Burroughs E 6000 Series Electronic Accounting System. That’s the same company that was originally known as American Arithmometer Company in 1886.

The E 6000 still used punched card input, an automatic striped ledger reader, and punched card tape or card output. It had internal programming and processing, and the memory capacity was an “impressive” 400-word electronic memory. That isn’t a typo. Keep in mind that Bill Gates reassured buyers 16 years later that “640K memory ought to be enough for anybody.”

Remember the concern about being “oversold” by high-pressure salesmen in the early 1920s? Well, a serious discomfort in the mainframe era involved obsolescence. The problem was defined in an article about technological or economic obsolescence in the September 1968 issue. “Computer manufacturers who act as lessors design the rentals so that the price of the equipment will be recovered within 3 to 5 years. With technical innovations occurring at such a rapid rate, it is conceivable and even probable that important changes in the hardware will take place during these periods.” The solution seemed to be to sign up on the lease list and be ready to replace your gear as improvements arrive. The “high pressure” motivating new sales pitches now came from the customer trying to avoid economic obsolescence brought on by outmoded technology, not from the dealer’s high-pressure sales staff.

SOFTWARE TAKES OVER

The half-century run for information recorded on paper cards, punched as round holes (Hollerith System) and later as square (IBM), gave way next to information stored as electrical bits and bytes on machinery that received its operational instructions from software. The operating systems came first, followed by specialized programs, office suites of programs, and, ultimately, the global enterprise resource planning (ERP) environments, first on-premises in the 1990s and then over networks. Today, software offered as SaaS (software as a service) is even more remote, deriving from clouds.

From the dawn of VisiCalc in 1978 to the financial software annual expositions like Softworld in the 1990s, boxed software moved prominently to the front. The Softworld Buyer’s Guide of Accounting and Finance Software in 1998 included 56 companies from AC Software to XecuTrack Accounting Systems. The companies brought with them 87 financial software products, offering demos and competing in shoot-outs with like offerings. Most of those applications and companies are no longer around today.

NEXT

What happened next was an Alice in Wonderland-like simultaneous shrinking and growing. Personal computers replaced the bunker-size mainframes in the basement with boxes on desktops throughout the building. Then came almost manageable-sized laptops, pocket financial calculators, PDAs (personal digital assistants) from Palm, and unplugged phones shrunk down to pocket size. And at the same time everything was shrinking, networks exploded.

Local area networks became wide-area WANS, and the four nodes of the ARPANET grew into the internet, the planetwide network, ultimately launching satellite nodes into the lower atmospheres. As computers of all kinds got smaller, they became more powerful, more connected, and equipped with unthinkable storage capacities. Yet the most dramatic innovations—AI, machine learning, and computers that might possess not only mathematical judgment but human judgment as well—have now appeared on the horizon.

A nostalgic look back at the 1919 back office, where the handwritten ledgers were on a shelf and the tabulator machine was reading patterns in hand-punched cards, seems quiet and much further removed than 100 years ago.

Michael Castelluccio has been the Technology Editor for Strategic Finance for 25 years. His SF Technotes blog is in its 22nd year. You can contact Mike at mcastelluccio@imanet.org.